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Transcript of 1 Presentation Crisis Management Tuesday September 29 St. John’s University Tuesday, September 29.
1
Presentation
Crisis Management
Tuesday September 29
St. John’s University
Tuesday, September 29
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Topics
BP Oil Spill Recovery
Chilean Mine Collapse
Jet Blue Airways Disruption
Crisis Planning at U.S. Airways
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Presentation
BP Oil Spill
The BP Crisis
Day 1. (April 20, 2010)
Transocean is preparing to move the Deepwater Horizon: Leased to the BP Group. Finished drilling a high pressure well for
BP. Explosion creates an out-of-control sea-
floor oil gusher. The oil rig sinks.
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In Fairness to BP
Horizon Deepwater was a very successful rig until April 20, 2010: Seven-year safety record. Drilling some of the deepest wells in the
world. Never fail or mostly working? Should BP have known?
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Mostly Working in Normal Times
2005: Texas City Refinery explosion. 15 deaths. 180 injuries. Cause: Hydrocarbon overflow. Maintenance
was cut as a cost-saving measure.
2009 post-disaster inspection findings: 270 unfixed safety violations. 439 new violations.
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Mostly Working
At the BP Texas City refinery in : 2006. Worker crushed between a pipe stack
and mechanical lift. 2007. Worker electrocuted. 2008. Worker killed by a 500-pound piece of
metal.
In the North Sea in good weather: 2009. BP helicopter ferrying workers from BP
oil platform crashed killing all 16 on board.
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Mostly Not Working
From 2007 to 2010, (Occupational Safety and Health Administration) OSHA reported: 851 willful safety violations by U.S. oil
refiners. 829 by BP.
February 2010. OSHA reported that “BP has a serious, systemic safety problem in their company."
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Information not Shared
On the Horizon Deepwater, workers were surveyed prior to the oil spill: Concerned about safety practices. Feared reprisals if they reported
problems. Unreliable equipment. “Run it, break it, fix it.” Did BP have access to the information?
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Failure to Collaborate
On the Horizon Deepwater, Transocean did a 112-page equipment assessment report: Unsafe conditions and practices. Rig had never been in dry dock. Blowout preventer rams and fail-safe
valves not inspected. 26 components and systems in “bad” or
“poor” condition.
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Lacey Resignation
Kevin Lacy was a drilling engineer who had implemented a rigorous drilling safety program at Chevron.
He was hired by BP in 2007 senior vice president for drilling operations.
He tried to improve and standardize the BP drilling policies and practices.
He resigned in 2009 believing BP was not committed to improving safety in offshore drilling.
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Ready to Respond?
Slow progress. It was one thing to be surprised. It is another thing to not be ready to respond. The crisis was attacked in stages.
Close blowout preventer valves. Add a containment dome. Pump in heavy fluids Pump in mud and cement.
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Outcome
Day 86. July 15, 2010 – Gusher was capped after releasing 5 million barrels of oil.
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Presentation
Chilean Mine Collapse
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Copiapó Mining Accident
A quite different picture
Day 1. August 5, 2010 Copiapó, Chile. Collapse of San José copper-gold mine Trapped: 33 miners 770 meters below
ground. Did they survive?
Quick Response
Day 4. Chilean President Sebastián Piñera
took charge. Andre Sougarret, head of El Teniente
mine put in charge. Flew immediately to Copiapó. Took charge. Did they survive?
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Situation at the Mine
Day 5. Sougarret: Found a nest of confusion with rescue
workers, firefighters, police officers, volunteers and relatives.
Sent rescue workers home. Talked to escaped workers. Inspected the mine. Gathered maps.
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Gathering Information
Day 6. Findings: Huge block of stone closed the 4-mile
corkscrew shaft to the miners. Collapse involved 700,000 tons of rock. Reopening the shaft could cause
another collapse. Nobody knew if the miners were still
alive.
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Hope for the Miners
Day 7.
Sougarret talked to miners who had escaped the collapse. Learned: Maps were not up-to-date. Likely location of trapped miners. Safe room with 48-hour supply of food and
water. Also repair shop. Ventilation shaft.. Miners had a chance to be alive.
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Find the Miners.
Green. 4 drill shafts to galley near shelter.
Blue. 4 drill shafts to shelter.
2 points of collapse
Repair shop.
Shelter.
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Start of Success
Day 17. The 8 drills are getting close. One drill broke through into the shaft near
the safe areas. Banging on the drill head. Rescue team retrieved note.
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Step 2. Prepare for the Rescue.
Days 18 to 69 Drill two 28-inch wide shafts. Send food, water, oxygen, messages,
progress reports. Monitor health conditions.
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Successful Rescue
Day 70. October 13, 2010 From midnight to 11 pm. One at a time. 33 times.
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BP Weakness Before the Event
Before the extreme event: Safety information identified but not
shared. Failures to comply with regulations not
in organized systems. Collaboration not encouraged.
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BP Weakness after the Crisis
Weaknesses include: Failure to respond decisively to spill. Failure to respond decisively to clean
up.
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Copiapó Situation
Copiapó was different: Good. Local risk management. Bad. Central risk management.
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Local Risk Management
Two safety features: “Safe” room.
Stocked with provisions. Ventilation shaft.
Separate escape route.
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Central Risk Management
Weakness before the crisis: Failure to maintain safety standards in a
dangerous place. Failure to install ladders after failing a
safety inspection that closed the mine. Opportunity lost. A second collapse
closed the shaft.
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Question
Did BP have the big picture in 2010?
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Big Picture
Board of Directors
Safety Practices in Texas
Cost Cutting
Concerns of Rig Workers
Maintenance of Oil Rig itself
Kevin Lacy Resignation
OSHA Violations
Big Picture
Top Management
High pressure well
41 miles from Louisiana wetlands
Everybody not ready
Rig needs overhaul
Rushing to complete drilling
Cost Cutting and 41 Miles
Linkages.
leads to creating
while
for a big loss when
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Cost Cutting
Unsafe practices
Rushing to complete drilling
Everybody is not ready
41 miles from Louisiana wetlands
Poor maintenance of oil rig
Question
Did Sebastián Piñera and Andre Sougarret have the big picture in 2010?
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Lesson Learned
Risk management has value. We cannot predict extreme events. We can look for the big picture. We can avoid some situations. We can prepare for others.
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Lesson Learned
Severity Trumps Frequency The value of risk management is not the
occurrence of extreme events. We may just be lucky. Who knows? But we should be ready.
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Presentation
Jet Blue Airways Disruption
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Jet Blue Airways
New York’s Kennedy Airport.
Valentine’s Day 2007.
Ice storm.
Trapped passengers on planes up to 10 hours.
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Question
Did the company have the Big Picture?
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Question (2)
What are some examples of disruptions?
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Answer
Examples: Ice storm. Police action. Terrorist act. Congestion. Maintenance. FAA regulations. Technology. Fuel shortage. Employee absence.
Strike.
Crazy person.
Power outage.
Communications outage.
Airport closing.
Improper training.
Absence of linguists.
Missing parts.
Accident/Crash.
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Question
Who should be responsible for disruption risk?
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Answer
Highest level. This risk is assigned to the Executive
Vice President for Flight Operations.
Next level. It is further assigned to Kennedy Airport
Operations Center.
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Question
What is the likelihood of a disruption of operations?
•An ice storm hits New York once every three winters.
•33%. The chance of hitting at a busy time.
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Answer
A disruption is likely to happen one time in a 9-year period.
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Question
How severe could it be to have a disruption of operations?
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Answer
Could be: A public relations nightmare if
passengers stranded on planes for long periods of time.
Financially costly to reimburse passengers for losses or time spent.
Harmful to long-term and cherished reputation for the highest quality of customer service.
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Question
What alternatives did Jet Blue have to mitigate the impact of a disruption?
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Answer (1)
Bus Contingency Plan. Unload planes sitting on the tarmac.
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Answer (2)
Additional Personnel. Train nearby headquarters staff.
"We had so many people in the company who wanted to help but who weren't trained to help,"
David G. Neeleman, CEO quote, New York Times”.
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Answer (3)
Revised Operating Procedures. For weather or other delays.
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Question
What were the consequences of the failure to prepare?
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Answer (1)
Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).
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Answer (2)
Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).Jet Blue was the cover story in Business Week on March 5.
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Answer (3)
More consequences. Jet Blue endangered: Top choice in national airline quality
rating (4 years in a row). Condé Nast Traveler reader’s choice
award (5 years in a row). High J.D. Powers ranking for quality.
Question
What happened to Jet Blue in the years after the Valentine’s Day disruption?
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Answer
Jet Blue recovered: Implemented a Customer Bill of Rights. Created a database to track crew
locations and contact information. Cross trained employees and had on
call in the event of a crisis. Created a Web-based rebooking
system to reschedule flights.
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Presentation
Tower
Request Takeoff
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Presentation
Crisis Planning at
U.S. Airways
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Question
U.S. Airways flight 1549 landed on the Hudson River in 2009 with no loss of life.
•Landing by pilot Sullivan was called the “Miracle on the Hudson.”
•How did U.S. Airways prepare for a crisis?
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Answer
Preparation: “Dry Runs.” 3 times a year at every
airport it serves. “Care Team.” Gates agents,
reservation clerks, and other employees dispatched on a “moment’s notice.”
800 Number. For families to call for information.
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Question
How did it handle the passengers who were removed from the plane?
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Answer
The airline took action: 150 employees from headquarters (Arizona)
to New York. Employees credit cards to buy medicines,
toiletries, and personal items. Bag of cash. Suitcases with prepaid cell phones and sweat
suits (dry clothes). Escorted passengers to hotels with 24-hour
buffets.
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Question
What else did it do?
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Answer (1)
More action: Arranged train tickets and rental cars for
individuals who did not want to get back on a plane.
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Answer (2)
More action: Arranged train tickets and rental cars for
individuals who did not want to get back on a plane.
Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.
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Answer (3)
More action: Arranged train tickets and rental cars for
individuals who did not want to get back on a plane.
Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.
Retained locksmiths to help passengers who had lost keys for cars and home.
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Question
Anything else?
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Answer (1)
Follow-up action: Sent letters updating passengers after
they arrived home.
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Answer (2)
Follow-up action: Sent letters updating passengers after
they arrived home. Refunded the airplane ticket and
gave each passenger $5,000 to replace lost possessions.
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Answer (3)
Follow-up action: Sent letters updating passengers after they
arrived home. Refunded the airplane ticket and gave each
passenger $5,000 to replace lost possessions.
Paid additional monies to passengers where $5,000 did not cover losses.
Question
Jet Blue stumbled. U.S. Airways seized an opportunity. Is life fair?
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Answer (1)
Is life fair?
•Jet Blue fully recovered.
•American Airlines acquired US Airways.
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Answer (2)
Is life fair?
•Jet Blue fully recovered.
•American Airline acquired US Airways.
•U.S. Airways management will run the combined airline from the American headquarters in Fort Worth, Texas.
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